Wednesday, 6 June 2012

Getting Time to Think

A common question asked by people in high-stress situations
is “Can I have a moment to think?” A
recent decision from the Ontario Superior Court would appear to affirm that one
can.

In the case of Rubin v. Home Depot Canada Inc., 2012
ONSC 3053 the Honourable Justice Thomas R. Lederer held that
notwithstanding that an employee had signed a “release” in favour his employer
with respect to his entitlements on dismissal, given the way in which the
release was put to the employee and signed, the release would not bind the
employee.

As Justice Lederer set out the facts:

[2] Eric Rubin had been employed by
Home Depot Canada Inc. and a predecessor since 1991. On July 28, 2011, without
any prior warning, he was terminated. Two days earlier, he had been instructed
to and, on July 28, 2011, he attended a meeting. He was not advised of its
purpose and assumed it was a “normal business meeting”. The meeting lasted only
a few minutes. As it began, Eric Rubin was given a letter terminating his
employment and was told that “this is your last day”. The letter advised that
“your current position, as a Competitive Shopper, no longer exists effective
today”.

[3] The termination letter “offered”
twenty-eight weeks pay in lieu of notice in the amount of $30,977.81. This was said to “exceed our obligations
under the Employment Standards Act”
in circumstances where the legislation required that Eric Rubin be paid
twenty-seven and three- quarter weeks pay in lieu of notice. The “offer” was to
continue Eric Rubin’s medical, dental and basic life insurance for twenty-eight
weeks (until February 9, 2012) or the date that Eric Rubin obtained alternative
employment. His Short-Term Disability (“STD”) and Long-Term Disability (“LTD”)
benefits were to be discontinued after eight weeks (September 22, 2011), which
was the notice period required by the Employment
Standards Act, 2000, S.O. 2000 c. 41 There is no reference to his
Accidental Death and Dismemberment coverage (“AD&D”) which, pursuant to the
Employment Standards Act, 2000, was
required to be maintained for eight weeks. Counsel for Eric Rubin understood
this to mean that this benefit was to be discontinued. The affidavit of Stephen
Fraser, the store manager, who advised Eric Rubin that he was terminated, says
Eric Rubin’s disability benefits were continued until the end of the relevant
notice period.

[4] To obtain the benefit of the
offer, Eric Rubin was required to sign the release.

[5] Eric Rubin executed the release
during the meeting. It was submitted that he did this because he believed the
offer he received from Home Depot was all that he was entitled to. The
termination came as a surprise. Eric Rubin was not thinking clearly and did not
think he had any option. At the time he signed the release, he was unaware of
his common law rights or his statutory rights, under the Employment Standards
Act, 2000. Shortly after the meeting, Eric Rubin came to realize that he had
made a mistake by signing the release. He immediately contacted his accountant and
his family lawyer. Eric Rubin was referred to his present counsel. On Friday,
August 5, 2011, counsel sent a demand letter to Home Depot challenging the
enforceability of the release and asking to negotiate a proper severance
package.

In reaching his decision, Justice Lederman made homage to Justice
Echlin’s decision in Brito v. Canac,
2011 ONSC 1011, a decision for which readers of this blog know I
have a special place, but relied primarily on the Ontario Court of Appeal’s
analysis in Titus
v. William F. Cooke Enterprises Inc., 2007 ONCA
573. The question that
Justice Lederer thus resolved was whether Mr. Rubin could demonstrate that the
release was unconscionable.

In answering the central question, Justice Lederer set out the
four part test for unconscionability as espoused by the Ontario Court of Appeal
in Cain v. Clarica Life Insurance Co. (2005), 263 D.L.R. (4th)
38, at para. 32:

a grossly unfair and improvident transaction;

victim’s lack of independent legal advice or other
suitable advice;

overwhelming imbalance in bargaining power caused by
victim’s ignorance of business, illiteracy, ignorance of the language of the
bargain, blindness, deafness, illness, senility, or other disability; and

other party’s [sic] knowingly taking advantage of this
vulnerability.

Did Mr. Rubin get a
fair deal?

On the issue of whether the transaction was unfair Justice
Lederer wrote the following:

Eric Rubin spent his entire working
life in the business of retail hardware. He was employed by Home Depot and its
predecessor for nineteen years and eight months (December 2, 1991 to July 28,
2011). From about October 22, 1994 to the day of his termination, he worked,
full-time, as a Competitive Price Shopper. In this role, it was his
responsibility to visit the stores of competitors to compare prices. He would
then prepare reports for management based on the information he had collected.
Nothing much was said about this in the material that was filed, but it stands
to reason that, while this job would not entail specialized skill or training,
the employer would benefit from Eric Rubin’s many years of experience in the
industry and in the position. The explanation given for his termination was an
“organizational change” being undertaken by the company. Whatever this may
mean, it makes clear that Eric Rubin was not being terminated for cause and
there was no evidence to suggest that this was brought on by any economic
concerns within the employer. Finally, I observe that, on the day he was fired,
Eric Rubin was sixty-three years old. It must have been obvious that, given his
age and the narrowness of his experience, that he could have difficulty finding
new employment. The question is whether,
in the circumstances, the notice provided is grossly inadequate; that is to
say, in the circumstances, would this award be sufficiently divergent from
community standards that it ought to be set aside? I find that it is. The idea
that, in the modern day, a twenty-year employee, moving to the end of his
expected working life, who is fired without cause, for reasons reflected in an
internal re-organization of the company, would receive only six months’ notice,
is far removed from what the community would accept. [Para. 17]

With respect to the second and third elements of the test,
Justice Lederer had no issue finding that Mr. Rubin did not have the benefit
of independent legal advice and the law has long recognized an imbalance of bargaining
power between employees and employers.

Did The Home Depot
take advantage of Mr. Rubin?

On the issue of whether or not The Home Depot took advantage
of its position Justice Lederer wrote that:

It is impossible to look into the
minds of the various officials responsible for the acts of Home Depot to find
proof that they set out to take advantage of the vulnerability of Eric Rubin.
But it can be implied from their actions and approach to the termination. There
was no negotiation or discussion as to how best to deal with the fact that a
decision had been made to let Eric Rubin go. He was presented with a response
to this decision that was prepared by, and shaped to respond to, the needs of
the company. The offer was presented in a way that was directed to getting it
signed. Eric Rubin was not presented with a choice calling on him to decide
whether or not to accept the offer. The letter advised him that he was already
being offered more than he was entitled to.
The proposition was that, if he did not sign, he would not be paid. The
letter did not say that the offer represented less than two days’ more pay than
he was entitled to be paid whether or not he signed. There was no suggestion
that he had common law rights that extended beyond the Employment Standards
Act, 2000 to which the letter referred. Not only did the letter explain there
were benefits that were being terminated immediately, but it also advised Eric
Rubin that he should replace those benefits as they lapsed. While, at first,
this seems like well-intentioned advice, it also makes clear that Eric Rubin
had new responsibilities that he would have to pay for. Where would the money
come from to do this; presumably, from the money received once the offer was
accepted. It might be easier to accept
this advice if the letter did not suggest that, among the benefits to be
replaced, were some (particularly AD&D) that Eric Rubin was entitled to
receive from Home Depot. The only practical choice that Eric Rubin was offered
was whether he wished to direct any of the money he was to receive to his RRSP.
Counsel for Eric Rubin referred to this approach as “presumptive selling”.
There is a question that is asked, but the question presumes that the buyer, in
this case Eric Rubin, has made a decision to accept the offer. The presence of “presumptive selling” is
confirmed by a second reference to the August 4, 2011 deadline found in the
termination letter. At the end of the
description of what was being offered, the letter directs: “Check appropriate
box below and return by August 4, 2011”.
The letter presumes the release will be signed. No other option is
offered. This approach, taken as a whole, is set to take advantage of the
vulnerability of the employee. I find this was arranged in the expectation that
it would direct, if not compel, Eric Rubin to sign the release. [Para. 32]

In concluding that the release should be set aside, Justice
Lederer added “Eric Rubin did not agree to anything. He simply accepted what he
was misled into thinking was his only option.”

In the result, Justice Lederer awarded Mr. Rubin 12 months
notice, mindful as was Justice Roberts of his advanced age and the limited
likelihood of him finding alternative employment.

The case is important for a number of reasons, and I would
suspect will be appealed.

The takeaway for employers is that it is prudent, when
putting releases to employees to ensure that they are afforded sufficient time
to consider the release and to obtain independent legal advice. It may be appropriate to borrow from our
American neighbours and afford employees three weeks to consider their
options. The failure to afford employees
such time, as is demonstrated in this case, can be the release being declared
null and void and a much higher notice period than was intended.

The takeaway for employees is not that one should simply
sign a release on the belief that it can later be set aside, but rather that
it is always prudent to have a severance package reviewed by a professional
employment lawyer before signing anything.
(On this point see my earlier
blog post about the perils of signing a poorly-worded release.)

If you have been recently dismissed from your job, and would
like to know if the offer being put to you is fair, I would be happy to
speak to you.

-- As always, everyone’s
situation is different. The above is not intended to be legal advice for
any particular situation and it is always prudent to seek professional legal
advice before taking any decisions on one’s own case.

Sean Bawden is an
Ottawa, Ontario employment lawyer and wrongful dismissal lawyer.
He tweets from @SeanBawden.